Ford, GM Report Falling Sales With Chip Issues Running Into 2022

Ford (f) could see a 37% drop in U.S. auto sales for the third quarter, ahead of a 29% drop for General engines (GM). The expected declines come after US auto giants shut down factories due to chip shortages and other disruptions to global supply chains weighing on dealers’ auto inventories.




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On Friday, US automakers will report third-quarter car sales.

According to JD Power and LMC Automotive, the Seasonally Adjusted Annualized Rate (SAAR) for new vehicle sales will reach 12.2 million units in September. That would be a decrease of 4 million units from September 2020 and a decrease of 4.9 million units from September 2019.

“September results show that there are simply not enough vehicles available to meet consumer demand,” said Thomas King, president of the data and analytics division at JD Power. Vehicle inventories and production are at historic lows as supply disruptions continue to challenge global automakers and push many car buyers out of the market.


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Strong Demand, Rising Prices Support US Auto Sales

As a result, new vehicles arriving at dealerships sell extremely quickly, analysts say. In September, almost half of the vehicles are sold within 10 days of arriving at dealer lots.

A consequence of the mismatch between strong consumer demand and limited supplies: nosebleed prices. Average transaction prices are expected to reach $42,802 in September, up 19% from a year ago and an all-time high.

So “automakers and retailers will continue to take advantage of the current intense consumer demand and achieve higher profits per unit sold,” King said.

For the third quarter, Ford is likely to report a 37% decline in US sales from the same period a year ago, estimates Cox Automotive. That would equate to a 29% decline for General Motors and a 23% decline for Stellantis (STLA), the parent company of Fiat, Chrysler and Peugeot. US sales should also fall 9% for Honda (HMC) and 8% for Volkswagen (VWAGY). Against the trend, Toyota (TM) should yield a 5% sales profit.

Still, on September 10, Toyota became the last automaker to warn of production cuts due to the global shortage of car chips. It said it would make about 40% fewer cars and trucks worldwide by October.

GM, Ford stocks work on buying points

Shares of General Motors fell 0.6% to 52.91 in the stock market today. GM stocks are working towards a 64.40 buy point from a cup base, back above the 50-day line but still below the 200-day line for now. Ford shares gained 1.2% to 14.33 on Tuesday. Shares of Ford sit above both the 50-day and 200-day lines as they operate at a 16.55 cup-shaped buy point, according to MarketSmith chart analysis.

In August and September, both Ford and GM temporarily closed factories as the shortage of car chips worsened. The delta variant of the new coronavirus has hit chip factories in Southeast Asia hard, putting further pressure on global supply chains.

For GM and Ford, those closures include factories that build popular and profitable pickup trucks.

Analysts now expect the market to recover only in 2022 or even 2023. JD Power has “significantly lowered” its 2021 global sales forecast by 3 million units to 80.6 million units. The company also lowered its 2022 sales forecast by 6.5 million units to 85.2 million. It warns that another 5 million units are at risk next year.

Find Aparna Narayanan on Twitter at @IBD_Aparna

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